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Healthcare, Monopolies, and Competition

September 15th, 2017 | No Comments

Imagine this. You are feeling under the weather. You pull out your smartphone and click the Rx app. A nurse arrives in 20 minutes at your home. He gives you a blood test and recommends to the doctor that she prescribe a treatment. It is sent to the CVS down the street, which delivers it to your door in 20 minutes. The entire event costs $20. 

Sounds nuts? Not so much. Not if health care were a competitive industry. As it is, medical care prices are up 105% in the last 20 years. This contrasts with the television industry, which is selling products that have fallen 96% in the same period. 

Take a look at this chart assembled by AEI. It reveals two important points. First, there is no such thing as an aggregate price level, or, rather what we call the price level is a statistical fiction. Second, it shows that competitive industries offer goods and services that are falling in price due to market pressure. In contrast monopolized industries can extract ever higher rents from people based on restriction. 

Consider each product or service shown. College is heavily subsidized, regulated, and exclusionary, and the costs are soaring. The textbook industry is hobbled by extreme copyright regulation, and can depend on captive buyers. Childcare is one of the most regulated industries in the country. Not just anyone can enter. Every aspect of childcare provision is controlled by the state. 

On the other hand, software, wireless service, toys and and TVs (see: free trade) exist in relatively freer market settings. The price pressure is down. 

It’s not that complicated, folks. If you want good services, good products, innovative ideas, and low prices, you need competitive markets. The more you control, the higher the prices and the worse the results. 

Richard N. Lorenc


Richard N. Lorenc

Richard N. Lorenc is the Chief Operating Officer of FEE and serves as managing director of FEE’s Youth Education & Audience Research (“YEAR”) project to develop and promote new content and distribution techniques for free-market ideas.

This article was originally published on FEE.org. Read the original article.

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